Bob's Discount Furniture has implemented a three-step strategy to address challenging conditions in the U.S. furniture sector. COO Ramesh Murthy told Supply Chain Dive the company is managing a 10% global tariff and a 25% tariff on upholstered furniture entering the U.S. Upholstered furniture tariffs were set to increase to 30% at the beginning of the year, but further increases have been delayed for an additional year. Murthy emphasized the outsized impact given that 50% of the product mix consists of upholstery.
Bob's tariff mitigation playbook consists of three core steps: sourcing diversification, cost negotiations with suppliers, and operational efficiency improvements. This approach mirrors strategies employed by other retailers including PVH Corp., Gap Inc., Newell Brands and American Eagle Outfitters. PVH, for example, plans to mitigate levies by leaning on re-sourcing and price adjustments.
The company has also faced pressure from fuel price spikes in Q1 2026. The ongoing Iran war has caused disruptions in the Strait of Hormuz, impacting global oil supply across multiple industries. CFO Barry Barton told analysts the company saw incremental trucking surcharges related to domestic fuel costs during the first quarter, though the impact remained small.
However, Bob's expects fuel-related pressure during the second quarter from linehaul and delivery costs. CEO Bill Lukach said the company is managing these costs through its logistics network and considers the situation largely manageable. Bob's is in discussions with vendors and ocean freight carriers regarding fuel cost mitigation.
Murthy emphasized that as a large player with strong relationships with ocean freight and delivery partners, the company feels confident in its ability to handle potential fuel shocks. Bob's is currently completing contract negotiations for next year with ocean freight carriers, noting that consistent volumes benefit carrier partners and strengthen the company's negotiating position in managing transportation costs.
Key Takeaways:
1. Bob's Discount Furniture faces 25% upholstery tariff and 10% global tariff, with 50% of product mix consisting of upholstered furniture.
2. The company employs a three-step tariff mitigation playbook: sourcing diversification, supplier negotiations, and operational efficiency improvements.
3. Fuel costs increased in Q1 2026 due to Iran war disruptions in the Strait of Hormuz affecting global oil supply.
4. Bob's expects additional fuel pressure from linehaul and delivery costs in Q2 but considers the situation largely manageable.
5. The company is completing contract negotiations with ocean freight carriers for next year, leveraging consistent volumes for stronger positioning.
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